CHOICE power switching survey

05.Case studies

Free footy membership sways customer

Competition in the electricity market has spurred a flood of discounts, promotions and offers to entice consumers to switch retailers. DVD players, discounts of up to 10% for paying on time and/or free electricity for one month comprise the usual bait. Loyalty retainers, such as movie tickets and vouchers, may also be mailed to you towards the end of your contract with your retailer.

Any deal you get will depend on how aggressive you are when negotiating with a retailer. Former AGL customer and CHOICE subscriber Donald McKinnon, from Adelaide, received an offer from Origin Energy to pay $100 of his football club membership – about 40% of the overall fee – if he signed up with them. “I called AGL and told them I was prepared to stay with them if they could match the offer, but they were simply not interested,” he says. “So I signed up with Origin and have stayed with them since. It is good marketing because I’m passionate about my footy.”

In 2005, SA took top spot in the world for switching, with close to 40% of its consumers switching retailers. There are currently 11 electricity retailers in SA, including active retailer AGL Energy, vying for a market of 800,000 customers, about one-third the size of Victoria.

$300 in hidden fees

Ken Harvey bought into a dual fuel (power and gas) deal offered by a door-to-door AGL Energy salesman in July 2008. The offer details signed by Harvey includes a 7% discount off his bills and a $50 voucher that could only be used with a $400 purchase of electrical appliances from AGL Energy shops. He was also given a 35-page booklet of terms and conditions.

One month after the switch, Harvey was slapped with a $300 “cash deposit request” in his first bill for changing electricity and gas suppliers. The fee was neither mentioned by the salesman, nor stated in the offer details. Harvey refused to pay and called AGL. “Both customer representatives I spoke to agreed the charge was inappropriate. One said he would take action to deal with it and would also pass on my complaint,” says Harvey.

However, the matter wasn’t settled. In January 2009 he received a reminder to pay the $300, with a warning that access to his utilities would be restricted if he didn’t. Calling AGL again, a customer service supervisor said the charge should have been declared upfront and stated in the offer details, but still insisted he pay. She also told him he had a 10-day cooling-off period (even though the fee arrived in his bill a month after he had switched) and pointed him to a condition in the terms and conditions booklet for this fee. Upon checking he only found terms pertaining to a “debt collection fee”.

Harvey escalated the matter to the Energy and Water Ombudsman Victoria (EWOV). After EWOV contacted AGL Energy, it waived the $300 fee. Harvey said AGL’s marketing was “misleading and deceptive” under the Trade Practices Act. The Essential Services Commission’s Code of Conduct for Marketing Retail Energy in Victoria states that retailers must clearly declare all charges to customers when offering contracts. When contacted, AGL declined to comment on this case until EWOV has concluded its investigation.